Continuing resolution postpones Cadillac and medical device taxes, suspends tax on health insurers

In addition to providing short-term funding to keep the federal government open, the continuing resolution (CR) bill, H.R. 195, which was signed by President Donald Trump on the evening of Jan. 22, contains three tax-related provisions. H.R. 195 further postponed the so-called Cadillac tax and the medical device tax and suspended the tax on health insurance companies for one year. All of these taxes were originally enacted as part of the Patient Protection and Affordable Care Act (PPACA), P.L. 111-148.

The Sec. 4980I 40% excise tax on certain high-cost employer health plans, popularly called the Cadillac tax, had already been delayed to 2020 by the Consolidated Appropriations Act, 2016, P.L. 114-113. The funding bill extends the moratorium for two more years until 2022 (H.R. 195 §4002, amending PPACA §9001(c)).

The medical device excise tax in Sec. 4191 was also enacted as part of PPACA. It was originally suspended for sales in 2016 and 2017 by the Consolidated Appropriations Act, 2016. The continuing resolution extends the suspension through Dec. 31, 2019 (H.R. 195 §4001, amending Sec. 4191(c)).

Finally, the health insurance tax, an annual fee on health insurance providers contained in Section 9010 of PPACA, will be suspended for one year only, for 2019. That means the tax will be in effect in 2018 and suspended in 2019; and if no other legislation is enacted changing the effective date, it will be in effect again in 2020 (H.R. 195 §4003, amending PPACA §9010).

The Congressional Budget Office estimates that the suspension and postponement of these taxes will lower federal revenues by $33.2 billion over 10 years.